Property taxes are a major expense for homeowners and real estate investors. Learn how to save on property taxes this year with the 3 best methods from our experts.
Property taxes are a major expense for homeowners. They lower returns for real estate investors, make homeownership less affordable for first-time buyers, they’re a struggle for families… we could go on.
Property taxes can vary a lot depending on where you live. From a very reasonable 0.18% of your home’s value (thanks, Louisiana!) to a shocking 1.89% (whoa… New Jersey, why?).
But in all, the average American pays $2,471 of property taxes each year, according to WalletHub and Census Bureau data from 2021.
But there are ways to lower your property tax bill!
So we asked our AQRE Home real estate experts for their advice, and compiled 3 of their top methods on how to save on property taxes this year. So dive in, and learn…
How to Save on Property Taxes:
Dispute Your Property Tax Bill
If your property tax bill is high, your could be overpaying.
This isn’t the fault of anyone. It’s most often caused by mistakes in calculating the value of your home. So, if you disagree with your property tax bill…
Your best bet is to challenge your home’s assessed value.
To do this, you need to prove that the assessed value of your home doesn’t reflect its property’s true value.
- Go over your current property tax bill and home assessment and check for potential issues or mistakes. For example, your home’s size could have been noted as being bigger than it is.
- Gather evidence that proves the true value of your home. You can search similar home listings, ask your real estate agents for records of similar property sales, or order a new independent appraisal.
- Go to the county/local tax office to lodge your complaint. This is your chance to present your case, and fill out a tax appeal with the evidence you’ve collected. You can find your closest tax office easily on Google.
- Wait and see. The tax office will assess your complaint, and maybe send an appraiser to re-appraise your home to confirm your evidence. If all goes well and your complaints were right, you will be refunded!
Find Out If You’re Eligible For a Property Tax Break
Applying for property tax breaks is another effective way to lower your property taxes.
Each state offers different property tax breaks, but they often provide tax relief for any of the following:
Groups Eligible for Property Tax Breaks
Veterans and surviving spouses and children of deceased or disabled veterans can claim property tax breaks.
Senior Citizens over 65 actually pay no property tax in 13 U.S. states and get partial tax breaks in many others.
People with Disabilities get tax breaks across the U.S. based on the percentage of a disability. These don’t only include property taxes, but school and other taxes as well.
Primary Residence Exemptions are also a popular tax break for residents of Texas. In the state, all households are exempt from paying taxes on the first $25,000 of their primary home’s value.
All these sets of people are eligible for a tax break.
And don’t forget, you might also be eligible for one of several property tax discounts (for example, if you pay your property taxes early), or tax deferrals for those unexpected financial emergencies.
Let’s say your neighborhood experienced a flood and it damaged your home… you can file a case to defer your taxes until you finish the repair!
How to Apply for a Property Tax Break
You can usually apply online, by phone or mail, or in person at your local tax office.
Applying will vary by area, but the usual application process goes like this:
- Find an eligible tax break. You can contact a lawyer, or just Google it yourself (try “[State] property tax breaks”).
- Make sure you qualify. Find the government’s application instructions and eligibility requirements of their website. Make sure you qualify and collect all the documents you’ll need to apply.
- Submit your application. Complete the application, and apply by the deadline with all the required documents.
The process can be tedious, but oh-so-worth-it when the lower tax bill leaves you with a few extra thousand dollars in your bank account… per year!
Deduct Property Taxes on Your Tax Return
Did you know that your property tax can actually be tax-deductible?
It’s true! You can deduct up to $10,000 ($5,000 if married filing separately). Use Schedule A when you file your return to figure your deduction amount.
So, What Property Taxes Are Deductible?
Property taxes you can deduct include taxes on your:
- Primary home
- Vacation properties
- Properties outside the U.S.
Or even cars, boats, and other vehicles that you own!
You can also deduct other home-related expenses like:
- interest on loans (such as loans for energy-saving home improvements)
- home office space
- investment property expenses (like insurance, utilities, and professional services for managing that property)
What Property Taxes Are Not Deductible?
Not all property-related taxes are eligible though…
The IRS doesn’t allow tax deductions for property-related expenses like:
- taxes on properties you don’t own
- taxes you haven’t paid yet
- transfer taxes on the sale of your property
- HOA fees
- costs of upgrading common areas of your neighborhood (ex: sidewalks, sewer systems, etc.)
- costs of over $10,000 ($5,000 if married filing separately)
How to Get a Property Tax Deduction This Year
- Keep a record of all tax-deductible expenses. Manage your finances like a business, and keep track of all the costs so you can later deduct them from your tax return.
- Figure your deductions using Schedule A when you file your return. Sadly, it’ll probably take more time to do your taxes since you’ll need to itemize instead of simply taking the standard deduction… but you could end up with a lower tax bill!
- Make sure to deduct taxes in the year you paid them. Sounds simple, right? Well… it can be confusing because there are some people who pay them monthly with their mortgage and they think they can deduct these too. But this is a mistake! Remember, only the taxes that were actually paid during the year count.
There are many different types of property tax breaks and deductions that you might be eligible for. These are all great methods on how to save on property taxes this year.
It’s important to research what is available to you and make sure to apply by the deadline. It can take time right now, but you could be saving yourself a lot of money in the long run!
One last thing: don’t forget to keep a record of your expenses and deductions!
It’s a lot easier when you have all your documents together in one place.
So, does this talk of property taxes make you itch to become a homeowner yourself?
Or are you tired of the taxes (or even behind on your property taxes) and looking to sell your home?
Either way, AQRE Home’s Property listings have you covered! List your home for free, or browse our growing list of properties across North America to get started!